A specialist watches stocks fall on his monitor from his booth on the floor of the New York Stock Exchange. / Kathy Willens, AP

by Adam Shell, USA TODAY

by Adam Shell, USA TODAY

Cyprus' announcement over the weekend that eurozone finance leaders were pressing for a one-time tax on depositors' savings in exchange for a financial bailout shocked global investors.

The proposal to have Cyprus savers share the financial burden of a bailout adds new elements of uncertainty and unpredictability to Europe's debt crisis. Worried depositors rushed to withdraw cash in Cyprus, where banks are closed for a holiday Monday.

Investors fear the unprecedented deposit tax, if approved by Cyprus' parliament, could set a precedent for other troubled economies, such as Italy and Spain.

That fear caused investors to be more risk-averse in the short term. Stocks fell sharply Monday in Asia and Europe and were trading lower in the U.S., but were well off their early lows.

Gold, the 'safe haven' investment, had risen more 1% to $1,609 an ounce. In New York trading, some of those gains disappeared and gold was at $1,603 an ounce in midday trading..

With major U.S. stock indexes trading at or near all-time highs, some Wall Street pros say Europe's latest turbulence could spark a long-awaited pull back in the U.S. stock market.

"In an environment where people are looking for an excuse to sell, I would say this news is as good (an excuse) as any," says Paul Hickey, co-founder of Bespoke Investment Group. "As you can imagine, a worry among investors is that if they can do it in Cyprus, why not anywhere else? The ... issue is how does it impact trust and confidence in the financial system. That will be the key to watch, and only time will tell."

At this point, adds Hickey, we could see this situation turning into a "modest correction."

Others say it's still unclear how the situation in Cyprus will affect U.S. stocks, given the fluidity of the situation.

"At this point, we think it is too early to tell, but expect news flow in the hours and days ahead will provide some clarity," says John Stoltzfus, chief market strategist at Oppenheimer.

Europeans are likely to worry about their bank deposits, says David Kotok, chief investment officer at Cumberland Advisors. The proposed Cyprus depositor tax would be 9.9% for depositors with more than 100,000 euros and 6.75% for those with less than 100,000 euros in the bank.

"No sensible foreign depositor would continue to keep money in a banking system that just took nearly 10% of his deposit without any notice," says Kotok.

John Manley, an investment strategist at Wells Fargo Advantage Funds, says it is possible authorities in Cyprus will take steps to soften the blow for depositors with savings below 100,000 euros.

"I think the (initial proposal) was meant to test the waters on a small scale," says Manley. "If the markets scream they may rethink."

Edward Yardeni, chief investment officer at Yardeni Research, says the latest flare-up in Europe is a reminder that the eurozone crisis has not been solved. "It demonstrates that Europe (and its debs crisis) will probably be with us for a very long time," he says.

But Yardeni says while the U.S. market is likely to suffer some type of sell-off, it doesn't preclude the U.S. market continuing to rise. The reason: He doesn't believe Cyprus will turn out to cause investors to panic and the financial crisis to intensify.

The biggest hit from this latest situation will be to investor confidence, Yardeni said.

On the plus side, Yardeni says U.S. stocks could benefit from the renewed concerns in Europe; the U.S., where the economy is improving, would be viewed as a better place for investors to park their money.

Likewise, the Cyprus bailout is not likely to have a huge negative impact on U.S. economic growth, which has been ticking up as the recovery and confidence (in the recovery) gain traction, says Joseph Quinlan, a market strategist at U.S. Trust.

"The impact on the U.S. should be marginal, or nothing the markets have not already discounted," says Quinlan. "A key offset to weakness in Europe is the re-accelerating growth in the U.S. and emerging markets."

The U.S. economy has proved it can keep growing despite economic stagnation in Europe. And U.S. companies continue to grow their profits despite continued pressure on their profits in Europe, Quinlan says.

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